Visitors unaccustomed to troglodytic existence emerged from the mouth of the Lower Adit relieved to discover themselves below cerulean Nevada skies. Inevitably, they compared the subterranean city to “Satan’s sooty kingdom.” Few had much desire to repeat the experience, which only exacerbated the divide between active miners and their supporting community. Underground, the Gould & Curry manager who guided one group lamented a recently struck stream of water that had flooded the winzes descending below the Lower Adit. Depending on how highly placed he was in the mine’s hierarchy, he might or might not have known that the flooded winzes contained the mine’s great secret. Despite the many press reports lauding the rich ore at the level of the Lower Adit, when the Gould & Curry’s Lower Adit had struck the ledge in June 1863, it had traversed just fifteen feet of third-class ore veined with a few better streaks. Winzes sunk from the adit level descended on a narrowing body of ever-lower-grade ore, which pinched out entirely fifty feet below. Beneath that, there was nothing, borrasca, as miners termed it, the opposite of bonanza, just a mass of worthless porphyry (vein matter) between the footwall and hanging wall of the Comstock. The Gould & Curry’s great bonanza had pitched south, into the Savage. Tens of thousands of tons of millable ore remained in the Gould & Curry above the level of the Lower Adit, and the mine would pay dividends for a few more years, but the barren winzes crushed the theory of inexhaustible silver mines paying dividends for centuries. Of course, only mine insiders had that information, and they withheld it from the public. To protect the treacherous winzes from prying eyes, Gould & Curry managers had allowed them to flood.
The mine’s trustees had known since the summer of 1863. Shrewd members of the mine’s inner circle, the “big fish,” had been unloading their stock ever since, foot by foot, careful not to pop the stock’s bubble while the public fixated on the mine’s bullion production. They cleaned up substantial piles. Many members of the public, without quality information, bought at high values and held their stock for years, watching it dwindle. (George Hearst, the consummate insider, walked away from the Gould & Curry and the Comstock Lode before the bubble burst with several hundred thousand dollars, the seed of a great fortune.)
Rumors of “bad indications” in the Gould & Curry buffeted San Francisco’s Montgomery Street in the spring of 1864. Stock traders heard that the mine’s new superintendent had discharged 150 men from the workforce. Some said the mine was exhausted; others thought the ore quality had dropped; whispers told that the mine had borrowed money to pay its last dividend.
Podgers of the New York Times explained away the insiders’ moves as “realizing” in order to fund a new banking concern called the Bank of California, which was forming under the leadership of Darius Ogden Mills and William C. Ralston, California’s two most formidable financiers. (Many of the twenty-three leading San Francisco businessmen and capitalists who founded the Bank of California had been Gould & Curry insiders.) The conservative D. O. Mills served as president. Ralston installed himself as cashier, and although ostensibly beneath Mills, Ralston was the institution’s driving force. Mills had built himself into Sacramento’s leading banker in the 1850s by only loaning on gilded security. A man who knew Mills said he “transpired icicles and micturated ice water”; another thought he possessed just enough of the gambling instinct to look for a sure thing before placing a bet.
Ralston had been deeply enmeshed in San Francisco banking since the mid-1850s. He’d served as treasurer of the Ophir, the Gould & Curry, and the Savage mines since their incorporation. Since the federal government’s introduction of paper currency in the early days of the Civil War, Ralston had made a fortune in greenback arbitrage. (Greenbacks held only a fraction of their face value in California, so a quantity of gold in California bought a large stack of greenbacks. Ralston shipped the greenbacks back to the eastern states, where they held more value. The greenbacks bought a stock of goods that could be sold at a profit in California, where gold transacted most business. That gold bought an even larger stack of California’s heavily discounted greenbacks and thus began another profitable arbitrage cycle.)
A “rousing, reaching, staving” California booster, Ralston had grown frustrated with his conservative East Coast banking partners. For some time, Ralston had been scheming to dissolve his New York partnership and form the first California-based banking corporation (rather than partnership) under recently relaxed California laws, a bank that would focus on serving California interests unhindered by East Coast obligations. Ralston began the change in the fall of 1863 and completed it the following summer. The Bank of California formally opened its doors on July 5, 1864, with $2 million in gold coin as opening capital. With the tentacles of its ownership reached into importing, dry goods, grocery, finance, staging and express, San Francisco’s nascent iron foundries, shipping and shipbuilding, the telegraph, stock brokerage, real estate, building, water delivery, and mining, the Bank of California sprang into existence as the leading financial institution on the Pacific Coast.
Washoe stocks had staged a modest rally in June 1864, but the Bank of California’s opening coincided with another rout. The selling panic climaxed in late July with Gould & Curry sunk to $900 per foot. The Ophir dwindled from its April price of $1,580 to $415. The wildcats “went up the flume” entirely. They were “completely destroyed.” The general public had finally realized that most Washoe claims were worthless. The steady stock market skid from the heights of 1863 ruined many men, including a small, delicate, gray-eyed Ohioan named William Sharon.
• • •
William Sharon would grow into one of the most consequential figures in the history of the Comstock Lode, a man without conscience uniquely adapted to exploit opportunities for connivery, duplicity, and market manipulation to the detriment of others—none of which was apparent when he first appeared in Virginia City in 1864. Sharon had been born on January 9, 1821, in Smithfield, in eastern Ohio, some fifty or sixty miles west of Pittsburgh, the second eldest of four brothers and three sisters. His father, a grave and determined man who ran a farm and a tannery, descended from “stern, rigid” Scotch-Irish Protestants who had emigrated to America from northern Ireland in the early eighteenth century. His mother boasted Scottish descent and cleaved to Hicksite Quaker beliefs, which emphasized the role of the inward light in guiding individual faith. William Sharon “imbibed” his mother’s religion in young childhood, but “contact with the world robbed him of much of the faith.” During his school years, Sharon was studious rather than athletic, with an “individuality” too pronounced to make him popular among his schoolmates.
When William Sharon was about twelve, his mother gave birth to her seventh child and died shortly thereafter. Sharon continued his common school education for the next four years. Seeing opportunity to free himself from the farming life in the commerce of the Ohio and Mississippi rivers, sixteen-year-old William Sharon invested his entire boyhood savings in an interest in a flatboat and cargo. The boat wrecked trying to pass the falls of the Ohio River at Louisville. Sharon and his associates sold what cargo they salvaged in New Orleans, but his partners stole the proceeds. William Sharon returned home at the age of seventeen having lost every penny he’d ever saved. His father didn’t have the money to send Sharon to college, but his father did have a few acres of surplus land. He gifted the use of those to his son. Plowing, planting, and tending the small farm for three years—tasks he found “distasteful”—William Sharon accumulated enough agricultural profits to fund two years at Athens College. “Circumstances” prevented Sharon from completing his college course. The prospect of a lifetime spent wringing existence from the soil motivated Sharon to apprentice in a Steubenville, Ohio, law office under attorney Edwin M. Stanton. (Stanton would rise through law and politics to become President Lincoln’s secretary of war.) Sharon stayed six months with Stanton before migrating to St. Louis, Missouri, where he gained admittance to the bar. In 1844, his health failed and he withdrew from the legal profession. He wen
t into business with his elder brother in Carrollton, Illinois, sixty miles north of St. Louis, and formed a firm friendship with John D. Fry, a Kentuckian who had been elected sheriff of Green County at age twenty-one, which earned him the frontier honorific “Colonel.”
Five years later, in 1849, Fry and Sharon decided to take advantage of the gold fever. They invested in saleable merchandise and a prefabricated frame building, shipped their goods around Cape Horn to San Francisco, and crossed the plains, mountains, and deserts to California, each man riding one animal and leading another. After recovering their goods in San Francisco, they went into business, for a few months, in a tiny mining camp called “Frytown” in Placer Country, then in Sacramento. Fry and Sharon did well until January 1850, when a flood washed away their store and merchandise. The disaster dissolved their business partnership, but not their friendship. Sharon went to San Francisco and prospered in real estate. Ten years older than most gold rushers, Sharon quickly assumed a respected position in San Francisco’s business community. He won election as assistant alderman in 1850, married the young daughter of a Canadian ship captain when she was still a teenager, and contributed his efforts to a property owners’ association that pushed back against a plague of squatterism. Sharon helped organize the Republican Party in San Francisco and played a minor role in the 1856 Vigilance Committee. Men came to value his opinion in business affairs, particularly in relation to real estate. By the early 1860s, his wife had borne him five children, three of whom survived infancy, and he’d amassed about $150,000. Seeing fortunes made trading mine stocks inspired Sharon to obtain a seat on the San Francisco Stock & Exchange Board, and he began investing in mines—which proved his undoing, for William Sharon knew nothing about mining. Issues of the Daily Alta California in late 1863 and early 1864 mention his owning substantially in at least four separate mining concerns, all of them obscure, and he likely owned in others. The commonly held belief in the “permanence” of the Comstock ore bodies animated his trading, and Sharon lost “every cent of his fortune.” In some of his largest transactions, Sharon thought he’d been cheated. As he would reminisce later in life, a few months into 1864, he had “the world before him and not a dollar to win it with.”
Fortunately, he’d developed a relationship with William C. Ralston, cashier of the new Bank of California. They’d known each other personally at least as early as 1857, when Ralston began courting twenty-year-old Elizabeth “Lizzie” Fry, niece and adopted daughter of Sharon’s longtime friend. Lizzie Fry and William Ralston married in May 1858. In July 1863, the Pacific Insurance Company opened for business with Ralston, Sharon, and several Comstock luminaries among its directors. Less than a year later, William Sharon was broke. Sharon’s “manly action” in making good on his obligations despite the suspicion that he’d been swindled won William Ralston’s admiration. Ralston bought Sharon’s real estate portfolio to help Sharon cover his stock-trading debts and kept him afloat with a monthly $250 stipend.
Sharon’s opportunity to reestablish himself came when a dodgy Virginia City banking firm failed, sticking Wells Fargo and the not-yet-formally-opened Bank of California with substantial losses. Wells Fargo had an agent in residence in Virginia City who took first choice of the securities. Ralston sent Sharon to Virginia City to pick through the leftovers. Sharon culled from the shuttered bank’s deeds, mortgages, and promissory notes, and he chose well. In time, the Bank of California recouped most of its losses.
While in Virginia City, William Sharon examined the state of Comstock mining. Although Sharon didn’t know “bird’s-eye porphyry from amalgam,” as the saying went, he had a broad base of business experience, and everywhere he looked, he saw chaos, confusion, and redundant effort. To him, it seemed obvious that the same fundamental principles required to prosecute other forms of business ought to be applied to mining. That point of view made the Comstock’s present depression into a purifying fire that would make way for the streamlined operations, economy, prudence, hard labor, and good management that would mature the industry. One key question remained: Could the mines expect to find new ore bodies at greater depth? Without deeper ore bodies, no investment could be justified. Sharon conversed with the lode’s leading men, gathering information. He listened. Despite the slump, many expert miners expressed confidence in the future of the mines. Sharon must have also seen that whether it was to Idaho, Montana, Utah, Colorado, Arizona, or other camps in Nevada, the knowledge, energy, and willpower driving the entire new deep-mining industry radiated out from Virginia City. San Francisco and Virginia City were the two nexuses from which to dominate the industry. To his eye, if the Comstock were to endure and develop newer and deeper ore bodies, it needed firm, confident management. He envisioned supplying it himself. As a first step, he became convinced that the Bank of California should open a branch office in Virginia City. He wired the idea to William Ralston.
Ralston wired back: “Come down, and we will talk it over.”
Sharon put forward his proposal to Ralston, Mills, and the other directors. A branch in Virginia City would give them clear insight into the true state of the Comstock mines, cash flows presenting more realistic information about industry affairs than the puffery of touts. Despite legends claiming that the bank directors approved Sharon’s proposal only when Ralston personally guaranteed the Bank of California against losses, it seems unlikely that Sharon and Ralston’s conviction would have convinced the other directors had not they agreed with the basic proposition—that opening branch offices in Virginia City and Gold Hill would prove a boon to the parent institution, facilitating capital flows between the two most important locales in the Pacific economy, diversifying the bank’s asset base, and giving it a voice in Comstock affairs. Among the Bank of California’s directors and original incorporators, Ralston, Mills, Joseph and William Barron, Thomas Bell, John Earl, Alpheus Bell, and Alvinza Hayward all had strong ties to the Comstock. Considering the multitude of California business interests they represented, most of them surely saw that the fortunes of the Bank of California, and to a certain extent those of the entire state, were wedded to the fate of the Comstock Lode.
• • •
Deciding who should head the Bank of California’s Virginia City operation posed an important question. Sharon proposed himself. Most of the directors didn’t like the idea. Sharon had just lost a fortune. Trusting him with another seemed foolish. Ralston suggested a man who had been working for him since 1856. Only after Colonel Fry and another man promised to assure Sharon’s personal solvency by privately advancing him $15,000 did Ralston acquiesce to his appointment. Even then, someone cautioned Ralston against Sharon, a notorious devotee of gambling at poker.
Ralston asked if Sharon won. The man admitted that Sharon almost always did. “He sounds like the very man I want,” Ralston said.
(Years later, a journalist asked a lawyer if his aggressive cross-examination had rattled William Sharon. “Rattle him?” the lawyer answered. “Do you suppose I can rattle a man who can bet a fortune on a busted flush and look as if he were going to sleep at the same time?”)
• • •
In the spring, summer, and autumn of 1864, while William Ralston, D. O. Mills, and William Sharon opened the Bank of California in San Francisco and Virginia City, the Civil War raged to its awful climax. The presidential election loomed over the battlefields. The Peace Democrats—the “Copperheads”—running against Lincoln advocated putting an immediate end to the fighting and negotiating for the reformation of the Union behind the slogan “The Union as it was, the Constitution as it is.” Since the seceded states rejected anything short of Southern independence, ballot box victory of the Democrats would partition the once United States. Union forces captured Atlanta in early September and sealed Lincoln’s victory. Eight days before the election, Nevada became a state. Since the start of the Civil War, several million dollars of gold and silver mined in the West had left San Francisco each month destined for eastern ports and cities, eit
her as bullion or coin. A significant portion of that wealth had been raised from the Comstock Lode. Even though the federal greenbacks weren’t backed by gold or silver, the steady infusions of western precious metals into eastern banks did much to bolster public confidence in the Northern economy and in the strength and durability of the federal government—and those repositories of confidence were cornerstones of the Union war effort. Inflation did erode the value of the federal greenbacks as the war dragged on, but economic conditions were always much worse in the South. No metal at all backed the Confederate currency, and blockaded by the U.S. Navy, the South and its economy received no substantial gold or silver infusions throughout the entire course of the war. Southern economic confidence waned. The South had no Comstock Lode, and the increasingly powerful inflationary whirlwind that battered the rebel economy sapped the Confederacy’s ability to wage war.
• • •
William Sharon opened the Virginia City branch of the Bank of California in September, on the ground floor of a building at the southeast corner of C and Taylor streets in the heart of town, and took up residence on the bank’s second floor. From behind tall windows, his “superlatively grand” vista stretched over the ridges and ravines falling into Six Mile Cañon and the Carson Valley lowlands beyond to touch the distant mountains. The rays of a setting sun rouging the far-off mountains made the view especially majestic. Sharon had left his wife and children in San Francisco, but he’d brought help in the person of “keen-eyed” Ah Ki, his twenty-eight-year-old Chinese valet. Ah Ki had come to California from an obscure village in South China in 1853. For three years he’d run a ten-pin alley on Montgomery Street, then waited tables in the clubroom of the Bank Exchange, where he and William Sharon established a rapport. When Sharon received the Bank of California’s Virginia City appointment, he asked Ah Ki to accompany him as his valet. Ah Ki accepted at “good wages.”
The Bonanza King Page 23